Bankruptcy Rules

Last year, 822,000 American families declared bankruptcy which represents a 38% increase. If you’re wondering if bankruptcy is an option for you, here is some information I found recently in a supplement to our local paper:

A 2005 bill made it harder to file by increasing fees and mandating credit counseling. Additionally, if you make more than the median income in your state, the law may prevent you from starting over. Instead of having your debt wiped out, you’ll often be required to repay it over a period of three to five years.

The new rules allow credit card companies to receive repayment based not just on the original charges but on accumulated interest and late fees too. (Doesn’t it always seem like the credit card companies win?) Here is the example that was given – a $2,000.00 doctor bill and an $800.00 credit card bill that has ballooned to $2,000 with penalties and fees are both treated as $2,000.00 bills.

Bankruptcy is even less helpful in a mortgage situation. Elizabeth Warren, a backruptcy expert at Harvard Law School says “There is very little that bankruptcy can do about mortgage debt. It can handle other debt, freeing up money to make mortgage payments.”

Politicians from both parties do understand the laws needs to be changed but no new bankruptcy legislation is likely to pass before 2009.

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